Harishkumar Mathuradas Barai V.M. Barai & Co Vs ITO (ITAT Rajkot)
The Income Tax Appellate Tribunal (ITAT) in Rajkot has deleted an addition of ₹6,00,000 made by the tax authorities against Harishkumar Mathuradas Barai under Section 40A(3) of the Income Tax Act. The disallowance was made on the grounds that the assessee had made cash payments exceeding the statutory limit of ₹20,000 to a single party, V.M. Barai & Co., for the assessment year 2015-16.
The ITAT’s decision was based on a prior ruling by a co-ordinate bench in a group case, Parsottam Madhavji Bhanusali v. ITO, which involved similar facts. In that case, the tribunal clarified that the provisions of Section 40A(3) apply to individual payments against a single bill, not to the aggregate of multiple payments made on the same day against different bills. The ITAT confirmed that the assessee’s payments were each below ₹20,000, even though they were consolidated in the books of accounts, and therefore did not attract the disallowance. The court noted that a disallowance under Section 40A(3) is applicable only when a payment, or the aggregate of payments made on a single day for a single bill, exceeds the ₹20,000 threshold.
Finding no change in the facts or law from the precedent, the ITAT Rajkot concluded that the addition made by the Assessing Officer was not legally tenable. Respectfully following the binding precedent, the tribunal deleted the addition, ruling the appeal in favor of the assessee.
